Friday, June 17, 2005

Alan Greenspan should work at a coffeehouse

"The apparent froth in housing markets may have spilled over into mortgage markets," Alan Greenspan, the Federal Reserve chairman, said while testifying to Congress last week. "The dramatic increase in the prevalence of interest-only loans, as well as the introduction of other relatively exotic forms of adjustable-rate mortgages, are developments of particular concern."

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."